Mark Nesbit
Jan 31, 2022
Permanent Vs Contract: Which Option Is For You?
Advice + Tools
Looking for your next career move?
You may find it useful to weigh up the pros and cons between permanent employment and contract employment before choosing which route is best suited to you. We've outlined the advantages and disadvantages of both permanent and contract roles below:
1
Advantages of being a contractor
- Better remuneration - As a contractor you would typically receive higher payment in your role than your permanent counterpart. There are number of factors affecting how much your day rate can be including the current economic climate and the demand for your specific skill set but on the whole contractors do tend to be paid better.
- Tax savings - As a contractor you will either operate as your own limited company or use an umbrella company, therefore you do not pay the same tax as a PAYE employee. Although operating as a limited company is the most tax efficient method of contracting, both options will save you considerable amounts in tax and make contracting more profitable.
- You are your own manager - Selecting which contracts to work is completely up to you as you are your own boss and all decisions are down to you. You can fit your contracts around yourself and your lifestyle.
- Job variation - Working as a contractor presents the opportunity to undertake a wide variety of roles. Every company that you work with is likely to be different to the last so there is little chance to become uninterested or unenthusiastic about the job.
- Build a network - Undertaking a range of contracts allows you to build a useful network of industry connections and suppliers to utilise in future contracts to improve the operation and add value to the company you’re working for. Somebody in your network of contacts may also be able to recommend your next assignment.
2
Disadvantages of being a contractor
- Job security - If the project you’re working is suddenly terminated or demand for your particular skill set declines, your job may well be under threat. It’s important to stay on top of your development and keep your skills in line with the market to avoid any risk of this.
- Administration - As a contractor you’re responsible for your own paperwork and administrative duties for the running of your business. You should also be aware of any legislation affecting you as a limited company such as IR35.
- Applying for contracts - At the end of every contract, the process of applying for the next one begins again. Downtime between contracts can be minimised if you keep your learning and skills development up-to-date to remain a desirable hire
- Benefits eligibility - Contractors don’t have the benefits available to them that full time, permanent employees do. You will always be required to take holidays between contracts as you won't have holiday allowance. Additionally, sick pay will be a thing of the past so you must make provisions for any eventuality.
- Skills training - You may receive free training during a contract but if you need to go on a course or gain a new qualification then you will have to fund this yourself. Your learning and development is now in your hands only and is crucial in securing future roles.
3
Advantages of permanent work
- Job security - If you’re looking for job security, guaranteed salary income and a long term position then permanent roles are for you.
- Belonging to team - As a permanent employee you’re more likely to be ingrained within the business and to be absorbed in the culture and work ethics of the environment that you work in.
- Progression opportunities - In a permanent role you usually have clear promotional criteria. You’ll also have more scope for moving up the career ladder and progressing to a higher level when you’re committed to a business as a permanent employee.
- Additional benefits - You will have a range of benefits and bonuses available to you that contractors do not including holiday and sick pay, pension plans, annual bonus, healthcare, car allowances, travel expenses and more.
- Training and development - More often than not training is included in permanent roles as it’s more worthwhile for the company to invest in you. After all, the more qualified you are, the better the service you’re able to offer on behalf of your employer!
4
Disadvantages of permanent work
- Lower remuneration - Salary may be less than a contract counterpart in the same role but you will be entitled to other benefits that may make up for this.
- Limitations - If your skill set is very specialist or niche you may be restricted as you can only work with the technologies and systems that your employer is using. You may be valued better in terms of salary as a contractor in this situation.
- Less experience - This is not to say that you won’t gain experience in a permanent role but your range of experience in different working environments won’t be as extensive compared to contractors’.
- Lack of flexibility - You have much less flexibility in your working routine and lower authority to make changes. You will usually be expected to work set business hours from the office with less freedom than a contractor.
- Job variation - You will not have as much variety in your day to day role in a permanent position and are more likely to become frustrated by the lack of change and new challenges.
